Wall Street down sharply, consumer concerns
The Wall Street subway station in New York (AFP/Angela Weiss)
The New York Stock Exchange closed sharply lower on Tuesday, concerned about the loss of momentum among inflation-hit consumers on the eve of another rate hike by the US Federal Reserve.
According to the final results at the close, the Dow Jones index fell 0.71% to 31,761.54 points. The Nasdaq fell 1.87% to 11,562.57 points and the S&P 500, the most representative of the American market, lost 1.15% to 3,921.05 points.
Warnings from Walmart, the country’s biggest retailer, have sent a shiver. The American supermarket chain slashed its quarterly and full-year profit forecasts Monday night as customers were forced to spend more on groceries and move away from higher-margin items.
Walmart stock fell 7.60% to $121.98, not far from its lowest level since the Covid-19 pandemic.
Rising food and fuel prices are shifting consumer budgets, forcing retailers to run promotions, stock more unsold items and postpone orders.
“While the market has probably already priced in the Fed’s expected rate hike on Wednesday, “it obviously hasn’t priced in corporate earnings surprises,” Maris Ogg of Tower Bridge Advisors summarized for AFP.
“Obviously, the consumer is weaker than we thought and the retailers don’t have the goods on the shelves,” adds the portfolio manager.
“My clients are all wealthy, but now they’re nervous about the stock market, about inflation, and about the consumer base,” she continued.
– trade damaged –
The stocks of other retailers also fell sharply, such as Target supermarkets (-3.62%), the discount chain Dollar Tree (-6.29%) or that of the semi-wholesale Costo (-3.25%). Amazon, the number one in online sales, did not miss out either (-5.23%).
One of Wall Street’s darlings, Canada-based online retail platform Shopify, fell 14% to $31.55 after announcing it would lay off 10% of its workforce, or 1,000 people.
The company, whose shares soared to $213 in November 2021 at the height of the pandemic and online shopping, issued a mea culpa for its e-commerce growth expectations “whose bet didn’t work out. paid statement,” acknowledged its founder.
In other bad news on the economic data front, “the consumer confidence index, released by the Conference Board in July, fell for the third straight month,” noted Wells Fargo analysts.
But it was mostly the tech-dominated Nasdaq that weighed on the market until post-close results from Google (Alphabet) and Microsoft were announced.
“When you have a session like today, people say, ‘Wow, retail isn’t doing well, so what’s going to happen next?'” explained Maris Ogg. . “So we’re taking profits from names that have rallied before,” like technology.
Alphabet (Google) ended down 2.56% to $105.44 but rose by the close in e-commerce (+2.63%) following the release of its results.
Despite slow-growing sales and declining profits, the web giant’s second-quarter results are less disappointing than feared.
On the other hand, Microsoft, which closed up 2.68% to $251.90, fell further (-1.15%) after the close after worse-than-expected results.
The Federal Reserve’s (Fed) program on Wednesday, which is forecast to be set to raise rates for a fourth consecutive straight session, added to markets’ jitters as the dollar rose sharply amid a lackluster backdrop for the euro-zone, particularly against the Euro.
Generally, a rise of 75 basis points is expected. Fed Chair Jerome Powell is set to address a news conference as markets wait for clues on future interest rate moves.
Another sector that bled Tuesday was that of cryptocurrencies. Trading platform Coinbase tumbled further, down 21% to $52.93 after press reports threatened an SEC investigation into its exchanges. This would be a new case following insider trading by employees uncovered last week.
Bitcoin lost almost 6% to $20,886 while Ethereum lost 9.40% to $2,122.